California's thriving virtual power plant program face significant financial reductions
California's DSGS Program Faces Funding Cuts, Threatening Grid Relief
The Demand Side Grid Support (DSGS) program, a pioneering initiative launched three years ago to address a grid reliability crisis, is facing significant funding cuts that could jeopardize its future and the state's ability to avoid rolling blackouts on hot days.
The program, which leads the nation in distributed energy, boasts 800 megawatts of capacity ready to participate in reducing peak grid demands this summer. With the ability to roughly double its impact on relieving grid stress by allowing equipment to send power back, the DSGS program could provide hundreds of megawatts of grid relief.
The state's budget crisis has led to cuts in the program's funding, including cuts proposed in Gov. Gavin Newsom's 'May Revise' budget plan. If the cuts are left in place, the program would have about $64 million for the fiscal year starting in July.
The proposed cuts would take away future funding promised in 2024, including from the state's Greenhouse Gas Reduction Fund and the climate bond passed late last year.
Companies working in the DSGS program, such as Sunrun, the country's leading residential solar and battery installer, have enlisted hundreds of thousands of customers capable of providing significant amounts of electricity to the grid. Sunrun's 'CalReady' virtual power plant, for instance, has 56,000 customers capable of providing 250 megawatts of electricity.
The DSGS program pays electric customers to reduce their energy use or provide power to the grid during extreme events. Companies paying customers for grid service consider the DSGS program a good deal, with $82 million remaining for future spending.
The most popular option for participants in the DSGS program is its battery storage virtual power plant, where customers agree to allow companies to dispatch their batteries on days when the day-ahead price of power exceeds $200 per megawatt-hour.
In a June 3 letter to state lawmakers, companies working in the DSGS program asked for existing funding to be preserved for market development and customer onboarding. The California Energy Commission structured DSGS to avoid the complications of past programs, but its future is uncertain due to these budget cuts.
According to Edson Perez, the legislative and political engagement leader at trade group Advanced Energy United, the funding cuts will severely cloud the outlook for the program. The state Legislature must pass a budget bill by June 15, and it remains to be seen whether the DSGS program will receive the funding it needs to continue its vital work.
DSGS is one of the few programs in California that allows solar-charged batteries to inject their power back into the grid, making it an invaluable tool in the state's efforts to maintain grid reliability. Without the DSGS program, California may face a higher risk of rolling blackouts during peak demand periods.
Despite the lack of specific public records about which companies have participated in the program or how much capital they have invested, the DSGS program has made a significant impact in California's energy landscape. Its future, however, remains uncertain as budget cuts loom.
